NEW YORK ( TheStreet) -- The Obama administration on Wednesday unveiled details of a broad refinancing program, first announced by the President in his State of the Union address last month. The program, which would require congressional approval, is directed at helping "responsible" homeowners, including those who owe more than their homes are currently worth, save an average $3,000 a year by refinancing their mortgages at attractive interest rates. The $5 billion to $10 billion proposal is expected to be funded by a proposed "Financial Crisis Responsibility Fee" that would be imposed on the largest financial institutions, based on their size and riskiness. President Obama also put forward a "Homeowner Bill of Rights" that would bring a uniform set of standards to make sure borrowers and lenders "play by the same rules." The Federal Housing Finance Agency (FHFA) will also announce a pilot program to convert foreclosed homes into rental units. Under the proposed refinancing program, borrowers with standard non-GSE mortgages (not jumbo loans) who have been current on their payments for at least the last 6 months -- and not skipped more than one payment in the 6 months prior -- and who have a minimum credit score of 580 will be eligible to get their loans refinanced through the Federal Housing Administration (FHA) into a 4.25% 30-year loan. To determine a borrower's eligibility, a lender need only confirm that the borrower is employed. The borrower will not have to submit a new appraisal or tax return. The Administration also proposes additional risk-mitigation measures, including requiring lenders interested in refinancing deeply underwater borrowers (where the loan-to-value ratio is greater than 140) to write down the balance of these loans to qualify. "This would reduce the risk associated with the program and relieve the strain of negative equity on the borrower," the White House said in a statement. Obama also proposed legislation to allow underwater borrowers to rebuild equity in their homes. Borrowers will have to agree to refinance into a shorter term loan of no more than 20 years with roughly the same monthly payments, which would allow them to pay down a greater portion of their principal and restore equity in their homes.
The President also called on the FHFA to streamline the refinancing process for GSE borrowers including eliminating appraisal costs for all borrowers. The proposal has already been panned by critics as "dead on arrival." Observers say the plan is unlikely to get Congressional approval as Republicans are unlikely to support a bank tax and are against further government intervention in housing. On the flip side, key electoral battleground states in Florida, Nevada and Arizona have been worst affected by the housing bust, making policies directed at underwater borrowers a key issue heading into the Presidential elections. "While the government cannot fix the housing market on its own, the President believes that responsible homeowners should not have to sit and wait for the market to hit bottom to get relief when there are measures at hand that can make a meaningful difference, including allowing these homeowners to save thousands of dollars by refinancing at today's low interest rates," the White House said in a statement. Shares of the biggest mortgage originators including Bank of America ( BAC), JPMorgan Chase ( JPM) and Wells Fargo ( WFC) were gaining 3.9%, 1.4% and 3% respectively in afternoon trading. Wells Fargo is expected to benefit most from a refinancing wave as it has maintained share in the mortgage origination market while Bank of America and JPMorgan have trimmed their presence. --Written by Shanthi Bharatwaj in New York >To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. >To submit a news tip, send an email to: firstname.lastname@example.org.